Tax Roundup, 12/14/2012: I want to lose weight. And I want more dessert!

December 14th, 2012 by Joe Kristan

Flickr image courtesy seriousbri under Creative Commons license.

Cause and effect: the Iowa Chamber Alliance can’t quite put them together. The umbrella group for Iowa’s chambers of commerce has issued its 2013 legislative agenda. The Des Moines Register reports (my emphasis):

TAXES: Iowa’s tax system is among the highest for businesses, the alliance contends, and commercial and property tax relief are needed. In addition, the group supports addressing unfunded mandates, public employee pensions and other measures to help offset rollback effects on local governments. The alliance also supports efforts to simplify and reduce corporate income taxes, and to streamline the personal income tax code.

So far, so good. But then:

ECONOMIC DEVELOPMENT: The Iowa Economic Development Authority needs money for flexible incentives to compete for investments and jobs, the allliance said. It backs a variety of tax credits to retain, grow and attract investments in Iowa, including restoration of the $185 million cap on economic development tax credits.

Let’s spell this out: Iowa’s tax code needs simplification because it is larded with “economic development” provisions, including dozens of “economic development tax credits.” The rates are high because if they weren’t, the special breaks would keep it from raising any revenue. To say you want lower rates, a simpler tax code, and economic development credits is like saying you want to lose weight and you want some more cookies.

If ideas proposed by the White House take hold—a long shot—rates for big companies likely would fall next year while those paid by many small-business owners through the individual tax system would rise.

That potential gap could encourage more companies to organize as corporations. For now, the prospect is strengthening alliances between Democrats and big-company CEOs on the one hand, and Republicans and small-business groups on the other.

IRS reminds taxpayers of “Savers Credit” (IR-2011-121) This non-refundable credit matches as much as 50% of taxpayer contributions to their IRA or 4o1(k) accounts. It works on joint returns with incomes up to $57,500 and single filers with incomes up to $28,750. Savings made when young can do great things when compounded over a career, and this credit makes it painful. Giving your recent grad starting out in the world some cash to fund an IRA can help build a nest egg and net a nice tax refund.

The wind energy industry could be self-sustaining over the long term if its primary federal incentive is renewed in 2013 and then gradually phased out over six years, the industry’s trade association said December 12.

Because the last 20 years of the tax credit just weren’t enough for a good buzz.

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